State Economists Revise Revenue Forecast, Governor Seeks Cuts

The two economists for the state of Vermont told the Emergency Board Thursday that the national economic downturn in the first quarter of this year has resulted in softer-than-expected state revenues. As a result, Governor Shumlin is asking state agencies to recommend cuts in their budgets averaging 4 percent.

In their biannual report to the Emergency Board, a special committee empowered to review budget issues when the legislature is not in session, state economists reported that general economic conditions have hurt Vermont's collections of personal income and sales-and-use taxes. State Economist and principle economic advisor to the Vermont Legislature Tom Kavet says there is still growth, but not much energy as the economy plods forward. “We’re getting job growth. We’re getting some improvement in incomes, some improvement in categories. But we’re just not seeing as much upward momentum, as much acceleration, as we might usually get at this phase of the business cycle. So that’s the reason for the adjustment down.”

Kavet and state economist Jeffrey Carr — the economic advisor for the administration — revised the forecast for revenue growth from 4.8 percent to 3 percent. “All we are doing is backing off on the pace of growth and revenues. It looks like the economy hit a pothole during the first quarter, which is actually the third fiscal quarter of the state’s fiscal year. What it’s done is slowed the rate of growth from the expectations that we had back in January of 4.8 percent revenue growth to now 3 percent revenue growth. And what’s that done is, for fiscal year 2015 anyway, that resulted in the overall reduction in the total amount of revenues we expect to collect by $28.8 million. Which I think transfers over to a little bit more than that in the budget.”

Governor Peter Shumlin is responding by asking state agencies to recommend cuts in their budgets averaging 4 percent. But he says he will shield certain areas from cuts. “We’re going to make this small adjustment to our $1.4 billion budget by insisting that we not raise broad-based taxes: income taxes, sales taxes, rooms and meals taxes. Vermonters’ taxes are high enough. Second, we will not shift any of this to hard working property tax payers. So education fund off the table. And third, we will not reduce our obligations to retirement or to debt reduction.”

Shumlin emphasized that while he is asking for cuts, he does not consider this a huge adjustment. “Let’s remember that we have seen growth in revenues, pretty substantial growth, $90 million in ‘13. And we are seeing growth this year. This is an adjustment that we feel is really important to stay on top of so that we’re not spending money that we don’t have. But this is not a huge adjustment when you look at a $1.4 billion general fund budget. Let’s remember this is a downgrade of an up year. This will be the biggest revenue year in Vermont history.”

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